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Why is Acala the "Polkadot Ecological DeFi Center"?



Acala is positioned as a one-stop Polkadot DeFi center. Acala is developed based on Substrate, and plans to bid for slots to become a Polkadot parachain to provide DeFi infrastructure for the Polkadot ecosystem. This article will briefly introduce Acala's 5 core businesses and how these businesses can promote each other to promote the development of Polkadot's DeFi ecosystem and help Acala achieve its vision. Finally, we will talk about how to participate in Acala's parachain auction plan. Specifically, Acala itself is a DeFi platform and is compatible with EVM. Based on this platform, Acala has also developed several core DeFi products, including the multi-collateral stablecoin aUSD, the liquidity release product LDOT, the automated market maker Acala DEX, and the decentralized sovereign wealth fund dSWF. Users can also use these products directly through the Acala APP. 1. Acala, an EVM-compatible DeFi platform, is a Layer 1 blockchain platform customized and optimized for financial scenarios. Developers can build various DeFi applications on Acala. Acala plans to become a parachain to enjoy the shared security, scalability, and cross-chain interoperability of the Polkadot network. It is convenient for developers to build DeFi applications. Acala provides a series of out-of-the-box DeFi components, such as decentralized stable currency aUSD, Staking derivatives LDOT, and decentralized exchange modules (described later). In addition, Acala has open sourced many practical modules for the developer community, such as the first oracle module of the Polkadot ecosystem, cross-chain asset standards, and a general monitoring framework. There are three ways to deploy on Acala: deploy as a Runtime module (Pallet), deploy as a Solidity or ink! smart contract, or build a Substrate chain and use XCMP to connect to Acala. Web3 Open Source University WTF Academy Receives Funding from Ethereum Fund: On January 2nd, Web3 Open Source University WTF Academy announced that it has received funding from Ethereum Fund. The funding will be used to create open-source Solidity tutorials (in Chinese and English), instructional videos, and a testing website. It is reported that the goal of WTF Academy is to guide 10,000 developers into the Web3 field. [2023/1/3 22:21:26] Ethereum Compatibility Since the Ethereum ecosystem is currently the largest and most active-zce DeFi ecosystem, Acala is compatible with the Ethereum Virtual Machine (EVM), allowing DeFi products built on Ethereum It can be deployed on Acala with only minor changes, thus bringing these products into the Polkadot ecosystem. In terms of compatibility with Ethereum, Acala has adopted a self-developed solution - Bodhi. To put it simply, it is a JavaScript SDK that simulates a Web3 provider and can package Polkadot Extension into an extension similar to MetaMask. In this way, the ready-made Ethereum Dapp can also use the Polkadot Extension plug-in to interact with the Acala EVM after being deployed on Acala. 2. Stablecoin aUSD Acala USD (aUSD) is a decentralized stablecoin that is collateralized by a variety of encrypted assets. The price is anchored to the US dollar, that is, 1 aUSD is always maintained at around 1 US dollar. Users can send and receive aUSD across chains between any blockchain connected to Polkadot. The price of cryptocurrencies usually fluctuates greatly, which brings high uncertainty to transactions, while stablecoins can act as a trading medium to hedge against price fluctuations. This makes stablecoins an important infrastructure for converting and circulating assets between DeFi projects. Honzon protocol ZenAcademy founder Zeneca’s Twitter and Discord accounts were stolen, and hackers released fake NFT airdrop news: On July 20th, NFT industry big V, ZenAcademy founder Zeneca’s Twitter account (@Zeneca_33) and Discord account in an NFT Hacked in a phishing attack. Hackers posted a fake airdrop message titled "Zen Academy Founders Pass," urging users to connect their wallets to participate in the so-called airdrop. At present, Zeneca's Twitter account has returned to normal. According to previous reports, Yuga Labs, the creative team of BAYC, tweeted and warned: "Our security team has been tracking a persistent threat group targeting the NFT community. We believe that they may soon pass stolen social media accounts. Launched an organized attack on multiple communities. Please be vigilant and stay safe." (ENW) [2022/7/20 2:25:58] aUSD stablecoin is generated and managed through Acala's stablecoin protocol "Honzon". Users can open a collateralized debt warehouse (CDP), deposit their encrypted assets as collateral in the collateralized debt warehouse, and obtain aUSD. The supply and demand of aUSD can be adjusted by stabilizing the rate, thereby adjusting the price of aUSD and realizing the stability of aUSD relative to the price of USD. In order to prevent price fluctuations of mortgage assets, over-collateralization is required. Currently, the mortgage rate is assumed to be 150%. That is to say, if you want to lend aUSD worth $100, you need to mortgage collateral worth at least $150. If you mortgage more, Your collateral will not be easily liquidated and therefore safer. When the price of mortgaged assets falls below the mortgage rate, Honzon will liquidate, that is, auction the collateral. Through Acala DeX, ordinary users can also participate in liquidation and purchase assets in liquidation at a lower price. Acala DeX will be mentioned later. KuCoin (KuCoin) listed MNST and ALPACA: According to KuCoin (KuCoin) official announcement, KuCoin announced the listing of MoonStarter (MNST) project and Alpaca Finance (ALPACA) project, and supports trading pairs MNST/USDT and ALPACA/USDT. The MNST recharge service will be opened at 20:00 on the 11th, and will be officially opened for trading at 21:00 on the 11th. The ALPACA recharge service is now open and will be officially opened for trading at 18:00 on the 11th. KuCoin (KuCoin) aims to discover high-quality blockchain projects and provide one-stop services such as spot, leverage, contracts, staking, and lending to 8 million users from 207 countries. [2021/6/10 23:28:18] For easy understanding, you can think of the Honzon protocol as an automated on-chain pawnshop. When you need money, you pawn valuable assets (such as DOT or other cryptocurrencies) at the pawnshop, and the pawnshop will issue a stable value certificate (aUSD) to you, and you need to pay certain procedures when pawning Fee (stability fee/interest), you can redeem the mortgaged assets after a certain period of time. If the price of your mortgaged assets drops rapidly, resulting in liquidation, the pawnshop will auction your collateral on the market (Acala DeX) (liquidation). 3. Release the liquidity product L-DOT In PoS chains like Polkadot, token holders can obtain income while ensuring network security through Staking, but the assets in Staking are within the lock-up period and unbond period Unable to transfer money, resulting in restricted liquidity. There may also be competition between staking and DeFi protocols. If the Staking interest rate is too high, then no one is willing to participate in the DeFi protocol. Conversely, if the DeFi interest rate is too high, resulting in a low Staking ratio, it will have a serious impact on network security. Homa Protocol Polkadot DeFi platform Acala announced that Karura Crowdloan has been launched: Polkadot DeFi platform Acala announced on Twitter that Karura Crowdloan has been launched. [2021/6/9 23:23:14] Acala's Homa protocol coordinates and balances the relationship between users and network security by creating a Staking fund pool, where users can deposit DOT in exchange for some freely transferable The certificate L-DOT on the Staking chain. Allow users to give them liquidity without losing their mortgage assets and rewards, and participate in financial services such as decentralized lending, leveraged transactions, and crowdfunding of high-quality projects. The Homa protocol is Acala's release liquidity protocol. L-DOT is a DOT ticket generated through the Homa protocol. L-DOT is a combination of staking principal plus future staking income. At any time, L-DOT can be used to redeem the corresponding assets. 4. Acala DeX Acala has a built-in decentralized exchange Acala DeX, which uses the AMM (Automatic Market Maker) mechanism for decentralized token exchange, and the trading pair uses aUSD as the base currency. Acala DeX was created in the form of Substrate Runtime Module to better integrate with other protocols of the Polkadot ecosystem. For the Acala platform and even the Polkadot ecology, Acala DeX has the following three meanings: Provide liquidity to start the ecology: DeX allows bridges to BTC, ETH and other assets of the Polkadot ecology, as well as DOT, ACA and aUSD, etc. A market for transactions. Used for stablecoin liquidation mechanism: When liquidation is triggered, the Honzon stablecoin protocol will sell assets on the DeX instead of directly conducting asset auctions. This increases reliability and reduces risk. Han Feng, Secretary-General of DACA Blockchain Association: The confirmation of data rights by blockchain will bring a future view of wealth: Han Feng, an iCenter tutor at Tsinghua University and secretary-general of DACA Blockchain Association, recently said in the blockchain: According to the Digital Wealth Salon and "Blockchain: Quantum Wealth View" seminar, the blockchain's right to data will bring a future view of wealth. [2017/12/27] Improve usability: DeX allows users to use multiple currencies to pay transaction fees, instead of only using the platform's ACA token. AMM operating mechanism: Each trading pair has a liquidity pool, each liquidity pool contains two tokens, and the transaction exchange rate between the two tokens is one token divided by another token. There are two roles in AMM, Liquidity Provider (LP) and users who conduct exchanges. Liquidity providers deposit two tokens in the pool at the same time to provide liquidity, thereby earning transaction fees and additional income (from the profit sharing of stability fees). Users can exchange A tokens for B tokens from the pool. The transaction exchange rate is determined by the amount of the two tokens provided by the initial liquidity provider, and then adjusted by arbitrage. 5. Decentralized Sovereign Wealth Fund dSWF Decentralized Sovereign Wealth Fund (dSWF) is an innovative form of on-chain fund management of Acala. Similar to some countries establishing sovereign funds to manage foreign exchange, Acala uses dSWF to manage assets in the network to achieve sustainable development. There are three sources of funds for dSWF: stability fees paid by aUSD borrowers, liquidation penalties, and L-DOT liquidity release fees. dSWF will accumulate these funds and purchase assets of other networks, such as DOT. After the first leased parachain slot expires, these reserved assets can be used to renew the parachain, etc. dSWF uses Substrate's flexible on-chain governance mechanism to manage the use of funds in the fund by Acala's on-chain governance. From the above part, we can see that Acala has a wide layout in the DeFi field, covering the current relatively large stablecoin, lending, and DeX fields on Ethereum, and has also made the unique Staking liquidity mortgage of the PoS chain, and also created its own dSWF. It can be said that if any of the above points are singled out, it has the potential to become a super-large-scale DeFi project. However, these businesses are not unrelated, but complement each other. It can be said that each part is carried out around the goal of Acala's "Polca DeFi Center". To give a few examples: 1. The goal of aUSD is to become a "hard currency" widely used in Polkadot DeFi. If no one uses aUSD, then this goal obviously cannot be accomplished, and then Acala DeX provides a powerful usage scenario for aUSD. Conversely, stablecoins are a very basic component of DeFi, and most DeX and other DeFi applications built on the Acala platform require stablecoins. 2. During the collateral liquidation process of aUSD, there are three protection mechanisms in total. First of all, the built-in decentralized exchange (Dex) in Acala can be used as a bottom-guaranteed liquidator. Second, it will use the high-quality surplus assets in the dSWF fund as a safety reserve to cover the bottom line. use DeX). 3. Homa can be used in combination with the Honzon protocol and DeX to help users amplify their staking profits. Users can first mortgage DOT to the Homa protocol to exchange for L-DOT, then take the L-DOT to the Honzon protocol to over-mortgage to generate aUSD, and then exchange aUSD back to DOT in DeX, so as to leverage higher returns. Polkadot’s parachain launch is divided into multiple stages: first, it will be tested on the test network Rococo, then the canary network Kusama will be launched, and finally the main network Polkadot will be launched.


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